European Markets Declined On Bank Weakness

4/13/2012 12:04 PM ET

The European markets finished solidly to the downside on Friday. The weaker than expected first quarter GDP report from China sparked growth concerns and caused investors to exit equities. The news that Spanish banks have increased their borrowing dragged shares of European banks lower.

The Chinese economy expanded at the weakest pace in nearly three years in the first quarter of 2012, with growth decelerating more than expected from the fourth quarter of 2011, mounting pressure on the government for continued policy action to support economic activity.

The gross domestic product expanded 8.1 percent year-on-year in the first three months of 2012, slower than the fourth quarter's 8.9 percent increase, the National Bureau of Statistics said Friday. The latest result was the weakest in 11 quarters. Economists expected a slowdown in growth to 8.4 percent.

Spanish banks stepped up their borrowings from the European Central Bank in March after it announced the second long-term refinancing operation in a bid to ease credit crunch. Bank of Spain data showed Friday that Spanish banks' net borrowing from ECB climbed to EUR 227.6 billion in March from EUR 152.4 billion in February.

The Euro Stoxx 50 index of eurozone bluechip stocks fell by 2.59 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, finished lower by 1.52 percent.

The DAX of Germany declined by 2.36 percent and the CAC 40 of France dropped by 2.47 percent. The FTSE 100 of the U.K. lost 1.03 percent and the SMI of Switzerland closed down by 0.87 percent.

In Frankfurt, Metro fell by 1.34 percent. UBS removed the stock from its Least Preferred List.

In London, Sage Group declined by 2.64 percent after Jeffries downgraded its rating on the stock to "Hold" from "Buy."

Barclays fell by 3.83 percent and HSBC Holding declined by 0.88 percent. Lloyds Banking Group lost 3.63 percent and Royal Bank of Scotland Group closed lower by 3.51 percent.

Shares of Daisy Group dropped by 3.27 percent after issuing a trading update.

Germany's EU harmonized inflation slowed in March as initially estimated, final data from the Federal Statistical Office showed Friday. The harmonized index of consumer prices for Germany, which is calculated for European purposes, rose 2.3 percent annually, which was slightly slower than the 2.5 percent growth seen in February.

U.K. factory gate inflation declined to the lowest level in more than two years in March. Nonetheless, higher oil prices lower the prospects of a further slowdown in the coming months. Output price inflation slowed to 3.6 percent annually in March, the smallest since January 2010, from 4.1 percent in February, a report released by the Office for National Statistics showed Friday. The rate stayed slightly above the 3.5 percent rise forecast by economists.

U.S. Consumer prices continued to rise in March, according to figures released Friday by the Labor Department, although the pace of growth slowed compared to the previous month. The Consumer Price Index increased by 0.3 percent in March compared to the 0.4 percent increase posted in February. The increase was in line with the expectations of most economists.

Consumer sentiment in the U.S. saw an unexpected deterioration in the month of April, according to a report released by Reuters and the University of Michigan on Friday, with the consumer sentiment index pulling back off a thirteen-month high. The report showed that the preliminary reading on consumer sentiment in the month of April fell to 75.7 compared to March's final reading of 76.2. Economists had expected the index to come in unchanged compared to the previous month.